The Arizona Housing Finance Authority has recently announced two initiatives that will help first-time home buyers in rural Arizona counties through the agency’s Homes for Arizonans initiative — The Mortgage Revenue Bond program and the Mortgage Credit Certificates program.
The combined value of the initiatives is approximately $25 million and is a combination of the agency’s Mortgage Revenue Bond program ($10 million) and the Mortgage Credit Certificates program ($15 million).
Both programs are aimed to assist first time home buyers and may be used in conjunction with the AzHFA down payment and closing cost assistance program in 13 rural Arizona counties – including:
- Santa Cruz
“For eligible families, these two programs can make the dream of homeownership a reality even in these difficult economic times.”
— Fred Karnas, AzHFA Executive Director
The Mortgage Revenue Bond Program
From the press release:
“Mortgage Revenue Bonds (MRBs) are tax‐exempt bonds that state and local governments issue through housing finance agencies (HFAs) to help fund below market‐interest‐rate mortgages for first‐time qualifying homebuyers. To be eligible, borrowers must qualify for a conventional loan, or government‐backed loan products such as FHA, VA, and USDA‐RD or a qualifying Fannie Mae or Freddie Mac conventional loan. Additionally, other qualifying criteria include limits on selected home prices and total household income. In general, family incomes must be below 115 percent the selected area’s median income. In a few instances, some program restrictions are waived for homes located in specific census tracts. Participating lenders can provide more information on which census tracts qualify for exceptions.”
The Mortgage Revenue Bond Program allows first time home buyers to get a 30-year fixed rate mortgage at below market rates for home buyers who qualify for eligible FHA, VA, or conventional loans.
In order to qualify for the program, there are limits on home prices (by county) and total household income. In general, family incomes must be below 115 percent the selected area’s median income. The buyer must not have owned a home in the past three years and the home must be their primary residence.
In some cases, some program restrictions/requirements can be waived for homes located in specific census tracts.
A Mortgage Revenue Bond loan can be combined with the Arizona Department of Housing Down Payment and Closing Cost Assistance program, but not with the Mortgage Credit Certificate program.
The Mortgage Credit Certificate Program
From the press release:
“The Mortgage Credit Certificate (MCC) program provides a federal income tax credit for eligible borrowers for first‐time homes throughout the life of the original loan. The annual credit is equivalent to 20 percent of the annual interest paid or accrued on the mortgage loan. Home buyers are responsible for obtaining a loan through a lender of their choice, and a one‐time program fee, equal to one percent of the loan amount is assessed. The annual tax credit provides a federal income tax savings for the home buyer and may help to qualify for a larger mortgage.”
The Mortgage Credit Certificate program provides a federal income tax credit for eligible borrowers for first‐time homes throughout the life of the original loan.
The annual credit is equivalent to 20 percent of the annual interest paid on your mortgage and is available for the life of the mortgage as long as the borrower lives in the property as their primary residence. Any unused tax credits can generally be carried forward three years for federal tax purposes. There is a one‐time fee paid at closing to participate in the Mortgage Credit Certificate program – 1% of the loan amount.
One potential benefit of the program is that the tax credit provides enough federal tax savings that the borrower could possibly qualify for a larger mortgage.
An example of how the Mortgage Credit Certificate program works:
$200,000 Loan amount
6% Interest rate
12,000 Interest paid 1st year
20% MCC credit rate
$2,400 Tax credit per year
Mortgage Credit Certificates can be used with fixed-rate or adjustable rate FHA, VA, and Conventional loans, but a certificate cannot be issued to a borrower who is refinancing an existing mortgage – only first time home buyers! Also, a certificate cannot be combined with the Mortgage Revenue Bond program and cannot be used with 100% seller financing.
AzHFA Down Payment and Closing Cost Assistance
From the press release:
“A third program available through the AzHFA provides down payment and closing
cost assistance. Through this Homes for Arizonans initiative, up to $20,000 of combined
assistance may be available for eligible first‐time buyers. All persons receiving this
assistance are required to complete a homeownership education program, and
additionally contribute a portion of their own funds towards the purchase price of the
home. If a buyer’s income is above 80 percent of the Area Median Income (AMI), down
payment and closing cost assistance must be used in combination with the MRB or MCC
programs. Should a buyer sell the home, or fail to use it as a primary residence, the
down payment and closing cost assistance must be repaid.”
According to the minutes of the June Arizona Housing Finance Authority meeting, Down payment assistance has been provided to 145 home buyers in the first four months of 2008. Assistance was provided to 167 home buyers in the same period in 2007. The average amount of assistance was $11,941 compared to $12,275 in 2007.
Down payment and closing cost assistance is available through the Homes for Arizonans Initiative and is administered through a network of nonprofit agencies and the Arizona Department of Housing and is dependent on 5 factors:
- Household income.
- Purchase price of the house or appraised value, whichever is less.
- Actual closing costs on the house.
- Household savings and assets.
- Other gifts or assistance the buyer may be receiving.
Assistance is provided in the form of a 0% interest, deferred payment loan, and must be repaid when the unit is sold or is no longer your primary residence. A note and deed of trust will be executed at closing to secure the down payment and closing cost assistance loan and the home buyer must invest at least $1,000 of their own money that cannot be borrowed or gifted. The closing cost portion of the assistance is not to exceed the actual closing costs or $3,000, whichever is less, and is provided in the form of a grant.
The Down Payment Assistance program guidelines do not allow cash back to borrower or consolidation of any debt.
If you are participating in multiple programs (for example, the Mortgage Credit Certificate program AND the Down Payment Assistance program), you will be required to complete free home ownership counseling classes, although if you meet certain criteria you may be able to take the classes online.
Lastly, there are only a certain number of lenders who administer the MRB and MCC programs — you can see the approved lender list here.
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